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Bonds climb, stocks slip as trade tensions fester

Sydney

BONDS rose globally, stocks fell in Europe and Asia and US equity futures declined amid simmering trade tensions between the world's biggest economies. The dollar nudged higher and crude oil gained.

Banks and carmakers helped pull the Stoxx Europe 600 lower after equities fell in Tokyo and slumped in Seoul. Contracts on all three of the main US benchmarks also dropped after President Donald Trump moved to curb Huawei Technologies' access to the American market. Gauges in Hong Kong and China climbed.

Treasuries edged higher, sending the yield on 10-year notes to the lowest level on a closing basis since 2017. Yields on similar-maturity German bunds extended their drop. The slide in yields speaks to the elevated level of anxiety across markets, as trade tensions between major economies fester and investors fret the outlook for growth.

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Equities have oscillated this week as traders scramble to make sense of a slew of headlines.

In the latest developments, Mr Trump signed an order that's expected to restrict Chinese telecommunications firms from selling their equipment in the US while giving the European Union and Japan a deadline to agree to "limit or restrict" car exports to the US.

Amid the confusing landscape, traders are increasing bets on the Federal Reserve cutting borrowing costs later this year. US Federal Bank of Richmond president Thomas Barkin said while he favours keeping interest rates on hold for now, he worries that business confidence has increasingly become more fragile.

"Depending on how long this standoff with China lasts, that impacts growth for longer and might force the Fed's hand," Esty Dwek, senior investment strategist at Natixis Investment Managers, told Bloomberg TV in Singapore.

"I wouldn't expect any big change in the short term, but the possibility of a cut much later in the year has risen," said Mr Dwek. Elsewhere, Australian government bond yields plumbed fresh lows and the Aussie fell as the unemployment rate unexpectedly rose, before the moves eased. BLOOMBERG